Usury, therefore, was prohibited in all cases.  Many people at the present day think that the prohibition of usury was the same thing as the prohibition of interest.  There could not be a greater mistake.  While usury was in all circumstances condemned, interest was in every case allowed.  The justification of interest rested on precisely the same ground as the prohibition of usury, namely, the observance of the equality of commutative justice.  It was unjust that a greater price should be paid for the loan of a sum of money than the amount lent; but it was no less unjust that the lender should find himself in a worse position because of his having made the loan.  In other words, the consideration for the loan could not be increased because of any special benefit which it conferred on the borrower, but it could be increased on account of any special damage suffered by the lender—­precisely the same rule as we have seen applied in the case of sales.  The borrower must, in addition to the repayment of the loan, indemnify the lender for any damage he had suffered.  The measure of the damage was the difference between the lender’s condition before the loan was made and after it had been repaid—­in other words, he was entitled to compensation for the difference in his condition occasioned by the transaction—­id quod interest.

Before we discuss interest properly so called, we must say a word about another analogous but not identical title of compensation, namely, the poena conventionalis.  It was a very general practice, about the legitimacy of which the scholastics do not seem to have had any doubt, to attach to the original contract of loan an agreement that a penalty should be paid in case of default in the repayment of the loan at the stipulated time.[1] The justice of the poena conventionalis was recognised by Alexander of Hales,[2] and by Duns Scotus, who gives a typical form of the stipulation as follows:  ’I have need of my money for commerce, but shall lend it to you till a certain day on the condition that, if you do not repay it on that day, you shall pay me afterwards a certain sum in addition, since I shall suffer much injury through your delay.’[3] The poena conventionalis must not be confused with either of the titles damnum emergens or lucrum cessans, which we are about to discuss; it was distinguished from the former by being based upon a presumed injury, whereas the injury in damnum emergens must be proved; and for the latter because the damage must be presumed to have occurred after the expiration of the loan period, whereas in lucrum cessans the damage was presumed to have occurred during the currency of the loan period.  The important thing to remember is that these titles were really distinct.[4] The essentials of a poena conventionalis were, stipulation from the first day of the loan, presumption of damage, and attachment to a loan which was itself gratuitous.[5] The Summa Astesana clearly maintained the distinction between the two titles of compensation,[6] as also did the Summa Angelica.[7]